The Holding Foreign Companies Accountable Act (HFCAA), enacted in December 2021, represents a significant shift in how the United States seeks to manage transparency risks tied to foreign corporate issuers. While the law’s immediate purpose is to protect investors by requiring foreign firms listed on U.S. exchanges to submit to audit inspections by the Public Company Accounting Oversight Board (PCAOB), its impact extends far beyond securities markets. The act’s provisions inevitably draw supply chains and procurement strategies into a regulatory framework once reserved for corporate financial disclosures. U.S. importers and multinationals with global sourcing footprints now face a heightened obligation to assess the audit integrity of their foreign suppliers, particularly in jurisdictions where PCAOB inspections have historically been blocked.
At the heart of the HFCAA is the requirement that foreign companies listed in the U.S. permit PCAOB audit inspections. A failure to comply for three consecutive years will lead to mandatory delisting from American exchanges. This stipulation places considerable pressure not only on issuers themselves but on the ecosystems in which they operate, including affiliated manufacturers, critical suppliers, and upstream partners that form part of broader supply chains. For U.S. importers, the challenge lies in ensuring that their vendors and the corporate groups to which those vendors belong are not inadvertently exposing them to reputational, legal, or financial risks linked to audit non-compliance. In practice, this means moving beyond transactional due diligence and embedding audit transparency considerations into the core of supplier risk management.
The availability of open PCAOB inspection reports creates new opportunities for U.S. firms to strengthen their vendor screening frameworks. These public reports provide insight into whether a given foreign auditor has cooperated with regulatory inspections or has been cited for deficiencies that could signal broader governance risks. For supply-chain managers, procurement officers, and compliance teams, systematically integrating this information into supplier assessments offers a tangible way to align with HFCAA expectations. Companies can no longer view their suppliers in isolation from the regulatory standing of the auditors overseeing those suppliers’ parent entities. The link between audit transparency and supply-chain integrity has been firmly established.
Importers and manufacturers that are serious about mitigating HFCAA-related risks must therefore adopt a disciplined approach to monitoring audit disclosures. This includes mapping supplier ownership structures to identify those connected to foreign issuers on U.S. exchanges, reviewing PCAOB findings related to their auditors, and escalating concerns where appropriate. The practical implication is that supply-chain due diligence now requires collaboration across functions that have traditionally operated independently. Legal, compliance, procurement, and investor-relations teams must work together to interpret audit data and determine how it should influence sourcing decisions and supplier engagement strategies. Such coordination is particularly vital in sectors with high exposure to global markets, where the failure of a single supplier to meet audit transparency standards could have cascading effects on operations and market reputation.
Beyond internal monitoring, U.S. companies should also engage suppliers in direct dialogue about audit compliance expectations. This may involve requesting formal confirmations that suppliers or their parent groups are aware of the HFCAA’s requirements and are taking appropriate steps to ensure audit cooperation where applicable. While this does not shift regulatory responsibility to the supplier, it fosters a culture of transparency and shared accountability that can enhance overall risk resilience. By proactively addressing these issues, firms position themselves not only to meet regulatory expectations but to reassure investors and other stakeholders that they are managing the complex interplay between financial transparency and supply chain integrity in a globalized economy.
The HFCAA signals an era in which financial and operational due diligence are becoming inseparable. Policymakers and economists should recognize that the act’s impact extends well beyond securities markets and into the fundamentals of international commerce. The intersection of audit standards, supply-chain management, and corporate governance will increasingly define how companies structure their global operations and how regulators assess systemic risk. The HFCAA represents an early but clear example of this emerging dynamic, and U.S. companies that take its implications seriously will be better prepared for the regulatory and market realities that lie ahead.